China’s Green Energy Boom: How Renewable Investments and Financial Markets are Driving GDP Growth in 2025

China has led the world in renewable energy investment over the past decade, led by its rapid expansion of green energy infrastructure. This shift has not only reduced reliance on fossil fuels but has also become a major facilitator of GDP growth. In 2023, the clean energy sector accounted for ‘40%’ of China’s Gross Domestic Product (GDP), which is crucial in meeting the government’s ‘5%’ growth target. GDP is the primary indicator of a nation’s economic health and growth, and is comprised of the total market value of goods and services produced within that country, typically within a year. Therefore, without this sector’s contribution, GDP growth would have fallen to just ‘3%’ instead of ‘5.2%’ (The People Republic of China, 2025, P.1). As clean energy demand continues to increase, China is set to maintain its dominance in the global green energy market through 2025 and beyond.

China’s Renewable Energy Infrastructure

Recent large-scale infrastructure projects in Western China have significantly boosted the country’s renewable energy output, contributing ‘33.9%’ of global green energy production (Harlan, 2022, P. 591). For example, The Three Gorges HVDC (high voltage direct current) transmission line, completed in 2017, has been instrumental in transferring renewable energy from the resource-rich eastern provinces, such as Gansu, to the western regions, including Hunan (Harlan, 2022, P. 591). The Gansu Province ranks 5th in China in terms of wind energy reserves, with the Hexi Corridor holding the richest wind resource area, and an average wind energy density exceeding ‘500 kWh/m²’ (Shen et al, 2009, P.1). Moreover, the rapid expansion of hydropower in Yunnan is transforming the province into one of the world’s largest hydropower hubs, with development concentrated along three major rivers (Hennig et al., 2016). 

While these projects appear to offer a sustainable and poverty-reducing path for China’s western regions, they are still shaped by state-led frontier development. The government controls how these regions are framed and utilised by defining them as valuable sources of low-carbon resources (Harlan, 2022). This process transforms land previously seen as marginal, such as grasslands, rivers, and mineral-rich areas, into economically productive spaces. Even though some areas are already integrated into resource extraction, others remain at the edges of both capitalism and state control (Harlan, 2022). However, the state’s discourse portrays these places as underdeveloped and in need of investment, reinforcing its role in directing economic expansion. For this reason, the government moved swiftly to capitalise on subsidies, further strengthening China’s self-sufficiency in renewable energy, solidifying its economic standing, and attracting foreign investment (Harlan, 2022). 

Capital Flows, and Stock Market Performance

Liu et al. (2016) suggest that the spillover effects of foreign direct investment in renewable energy contribute positively to the performance of China’s energy sector. This is largely due to firms being able to capture, control, and monetise the economic benefits of low-carbon initiatives within their industries, creating strong incentives for firms to invest in renewable energy. Additionally, the strong stock market performance has enabled Chinese companies to raise capital at lower costs, fuelling innovation in green technology (Liu et al.,2016). These findings suggest that green finance investment and technology consistently drive green growth in the long run. Such lower production costs have, therefore, made China’s renewable sector highly competitive on a global scale and have significantly driven economic expansion with production costs ‘40-50%’ lower than in the U.S and EU (International Energy Agency, 2024, P. 20). 

* One key indicator of this leadership is China’s green bond issuances, which has surpassed that of other major economies such as Germany, with a 381% difference in 2023 (Figure 1) (Federal Ministry of Finance, 2023). This strengthens its position as a global leader in renewable energy investment while attracting a diverse range of investors. Although the exact number of bonds issued in 2024 is not yet available, China’s commitment to clean energy projects remains evident.

China’s Green Bond Issuances (2020-2023)

Likewise, the increased investment in clean energy has contributed to a trade surplus by increasing production capacity, leading to higher exports and an improved balance of trade. Therefore, as global demand for clean energy rises, China leverages its cost advantages to sell goods competitively worldwide. Many countries now depend on China’s clean energy exports, which have exceeded ‘$340 billion’, a ‘70%’ increase from the previous year and equivalent to the combined oil export revenue of Saudi Arabia and the UAE in 2024 (International Energy Agency, 2024, P. 22). 

Furthermore, current fiscal policies supporting the clean energy transition include government-backed banks offering low-interest loans for green projects that mitigate financing risks. Initiatives such as the Green Finance Guidelines issued by the Peoples Bank of China (2016) encourage stock market incentives for green companies, further reinforcing the country’s 2050 green energy plan and its broader industrial transformation goals. Although China’s GDP has noticeably slowed down in recent years, the end of China’s 14th five-year plan in 2025 will be expected to introduce new policies aimed at further reducing carbon emissions and promoting sustainable development (The People Republic of China, 2025)

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